United States: Pension-Related Reduction In Redundancy Compensation Provided By A Social Plan: Discrimination On Grounds Of Disability But No Age Discrimination

Pursuant to a decision of the European Court of Justice ("ECJ") in a preliminary ruling upon reference of the labor court Munich (Odar vs. Baxter, ref. C-152/11, decision of 6 December 2012), a formula in a social plan which reduces the redundancy pay for employees who are close to qualifying for statutory retirement pensions, including early pensions with reductions, does not constitute age discrimination. However, such formula may constitute a discrimination based on disability in violation of the provisions of the Equal Treatment Framework Directive (2000/78/EC).

Note that a reference for a preliminary ruling allows the courts of the Member States to refer questions to the ECJ about the interpretation of European Union law or the validity of a European Union act. The ECJ does not decide the dispute itself. It is for the national court to dispose of the case in accordance with the ECJ's decision, which is similarly binding on other national courts before which a similar issue is raised.

Introduction. The EU Directive 2000/78 on equal treatment in employment was transposed into German law by the General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz–"AGG"). Pursuant to the AGG, redundancy compensation plans (so-called "social plan") can provide for different amounts of compensation payments if the compensation scheme is graduated according to age or length of service. The AGG further allows that the social plan excludes from the benefits it provides employees who are deemed as financially secure because they are entitled to a statutory pension, even though they have been receiving unemployment benefits prior to that.

Case. Baxter Deutschland GmbH ("Baxter") entered into a social plan with its works council, providing for compensation payments for employees suffering from a redundancy. The compensation was calculated according to a standard formula, taking into account the employees' length of service and age.

For employees older than 54 years old, an alternative calculation applied which did not take into account their length of service, but on the contrary, took into account the number of months which existed before being able to receive, at the earliest possible time, any kind of pension income whatever its amount.

The definition also covered any reduced pension income due to an early beginning of retirement (i.e., early retirement due to disability). In the present case, the employee, Mr. Odar, was 58 years old and recognized as being severely disabled. He had been employed for almost 30 years with Baxter when Baxter terminated his employment relationship. Under the German retirement pension scheme, Mr. Odar would have received an ordinary old-age pension at the age of age 65 but, being severely disabled, could claim an early retirement pension at the age of 60 which would be of a reduced amount. Pursuant to the special calculation formula from the social plan, Baxter paid to Mr. Odar a reduced compensation (as Mr. Odar was older than 54 years and could benefit from a early reduced pension income due to disability). Mr. Odar brought an action before the labor court of Munich requesting that Baxter be ordered to pay him additional compensation equal to €272,000, corresponding to the difference between the compensation he effectively received and the amount of compensation he would have received had he been not older than 54 years of age and the standard formula had been applied to him. He argued that the reduced compensation provided in the social plan was, in fact, discriminating on grounds of age and disability.

Decision of the ECJ. The Baxter social plan provides for a calculation method taking into account the employees' age. Such difference in treatment on the basis of age is justified pursuant to Directive 2000/78. Indeed, since older employees mandatorily receive a statutory retirement pension as of age 65, the social partners can rightfully decide to reduce in the social plans they negotiate the redundancy compensation payment for them.

However, the ECJ holds that the prohibition of discrimination on grounds of disability precludes the implementation of the social plan's provisions which take into account the possibility of receiving an early retirement pension on grounds of disability (alternative special calculation formula). Pursuant to the Baxter social plan, severely disabled employees are paid a redundancy compensation which is lower than the amount paid to a nondisabled employee of the same age. This difference of treatment cannot be justified as it constitutes a discrimination based on disability.

Comment. The reduction of redundancy compensation for employees close to old-age retirement does not constitute age discrimination. In that aspect, the ECJ follows the German Federal Labor Court, which has always accepted such difference in treatment. It is justified by the objective to grant compensation to former employees for the future, whilst taking into account the need to achieve a fair distribution of the company's limited financial resources in the context of a social plan. Moreover, the aim of preventing persons who are not seeking new employment, but who will receive a replacement income in the form of a retirement pension, from claiming a compensation upon termination must be considered as legitimate. However, the ECJ considers that a further reduction of redundancy compensation for employees eligible for early retirement due to disability constitutes a discrimination based on disability. Indeed, these rules have an excessive adverse effect on the legitimate interests of severely disabled employees and on the social policy objectives pursued by such early compensation. In the future, the social partners negotiating a social plan will have to exclude the parameter "early retirement pension" from alternative calculation formulas for redundancy compensation, to prevent discrimination due to disability. In addition, they will also have to exclude the employees' gender or face the possibility of being considered to discriminate due to gender.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.